cancel2 2022
Canceled
The Hollande government in France took his advice about raising taxes and there has been a mass exodus of the wealthy, many of them to London. The elitist Left have taken Piketty to their hearts as he appears to be the new Marx, it's just a pity that it is Groucho and not Karl!
Thomas Piketty's Capital in the Twenty-First Century, a modern version of 'Das Kapital’, calls for a global wealth tax, and ignores some obvious truths
For many on the Left, François Hollande’s drubbing in local elections is not about policy failure, but weak political leadership. It’s the man, not what he was trying to achieve, that is wrong. This makes for a nice line in fantasy, but the reality is that the Hollande policy agenda has been a disaster for France, with a growing exodus of the rich and talented, rising unemployment, and a sense of lost national pride and self-confidence reminiscent of Britain in the Seventies.
How apposite, then, that the humbling of Hollande’s government should coincide with the English translation of a book that provides a kind of reinvented intellectual justification for Left-of-centre thinking, and, according to the author, the “evidence” of growing inequality to back it up. Billed as one of the most keenly awaited economic texts of the post-crisis era, Capital in the Twenty-First Century is the work of a French political activist and economist called Thomas Piketty. As its name implies, it is a kind of updated Das Kapital, but without the revolutionary call to arms. None the less, its economics are not so dissimilar to the Marxist original.
Most economists, when analysing inequality, focus on income disparities, and the way these entrench social divides across generations. Piketty’s big new insight is to demonstrate pretty convincingly, assuming he’s not cocked up the data, a not-infrequent occurrence among economists that capital accumulation is growing at a much faster pace in advanced economies than output and wages. Pools of wealth are getting bigger as earnings stagnate. Labour is taking a decreasing share of the pie, capital a growing one. Neo-liberal assumptions that economic growth “lifts all boats” have been proved wrong, Professor Piketty argues. Increasingly, it is just the yachts. If current trends continue, “the consequences for the long-term dynamics of wealth distribution are potentially terrifying”.
Yet if all this is true, how come, as François Hollande has demonstrated anew, traditional Left-wing solutions still gain so little traction? Even where the popular mandate for such actions exists, it quickly dissipates in the impoverishing consequences of implementation.
Capital is undoubtedly an important book, which contains some genuinely groundbreaking new research. Yet there is also a lot which Prof Piketty skirts around or ignores in this supposed exposé of the “contradictions” at the heart of modern capitalism.
The most obvious of these omissions lies in the very nature of wealth and income disparity, which tends to be much more granular and transitory over time than he suggests. The difference between the top and the bottom is undoubtedly widening, but the idea that people are permanently divided into and trapped in various income and wealth groups is a statistical illusion.
In fact, the earnings power of the vast majority of people will move up and down during their lifetimes. Someone just out of school or college is likely to be a low earner, but by middle age can reasonably aspire to be at least in the top half of earners. By the same token, relatively few people manage to be in the top 10 per cent, let alone the top 1 per cent, for anywhere near their entire working life.
The same is true of wealth. Younger workers tend to have no wealth, those approaching retirement at least some wealth. Nor are wealth differentials entirely a social and age-related phenomenon. Londoners are likely to be a great deal richer than their counterparts in, say, the North East, if only because house prices down south have risen so much more strongly.
As for bigger, inherited fortunes, these tend to be largely blown and therefore recycled within two or three generations. The wealth accumulated by the 19th-century American railroad mogul Cornelius Vanderbilt would have put today’s Russian oligarchs to shame. He was worth tens of billions in today’s money. His son managed to double it again, but by the late 1940s, it had all gone, squandered or otherwise lost. Exceptions to this rule, such as the Duke of Westminster’s Grosvenor Estate, are rare.
None of this is to deny the grinding and inescapable reality of poverty for those at the bottom of the pile, or the sometimes undeserved privilege of those at the top. But the idea that the difference between, say, a $1-a-day Indian peasant and the billionaires of Mumbai is explained by “market forces” is simply laughable; in this and most other cases, it is bad and corrupt government that keeps the masses in poverty. As for the West, we live in a world where the incentive to save and accumulate among low earners, and even some high earners, has been almost entirely removed by the safety net of welfare.
Low interest rates, actively pursued by governments through quantitative easing, have both prevented the wealth destruction you would expect after the implosion of the credit crunch, and turbocharged many asset prices, thereby greatly increasing the wealth divide. How is this the result of “market forces”?
Inevitably, I suppose, Professor Piketty proposes more taxes, and in particular, a globally imposed wealth tax. Good luck with that one. There is more chance of international agreement to bomb the Parthenon than there is of a global wealth tax. Come (Swiss: CADN.SW - news) to think of it, hasn’t President Hollande already tried wealth taxes? Why, yes, he has, and highly effective it has proved in making France a great deal poorer.
https://uk.finance.yahoo.com/news/don-t-blame-wealth-gap-064022670.html
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